Month: August 2017

Amazon is building an ecosystem of features to power the next generation of brands

AWS is the single biggest reason for the glut of tech startups we see today. It has significantly reduced the time, money and skills required to go to market. There has been a lot written about Amazon’s recent push into online advertising and whether it could one day challenge Google and Facebook. While that is anyone’s guess, a direct comparison misses the point of how the world of brands has changed from the time when Google and Facebook were built and how Amazon is trying to build for the future.

Amazon is building an ecosystem of features, advertising being one of them, to fundamentally change the way new brands are launched. It is positioning itself as the AWS for new brand launches; simple, cheaper and better.

Over the last few years, there has been a secular trend towards DTC (direct to consumer) brands. These brands have emerged to fill in the need gaps created by years of minimal innovation in product and delivery mechanisms on the part of the incumbents. Recent acquisitions of Dollar Shave Club and Bonobos prove that these brands are creating something of value. While more and more DTC brands are coming up in all kinds of categories, discovering product-market fit continues to be a process of tying together multiple loose ends. One has to build a differentiated consumer website/ app, get consumers to visit it by deploying a range of social media strategies, and then make these customers cross the chasm to a sale by having them set up their account (and enter their credit card info).

There are so many things in this process that could go wrong that one isn’t able to get a clear signal on the value of the product itself. In addition, the fact that everyone is playing the same customer acquisition game creates a lot of waste, pushing up the cost of resources required to be successful. Consumers looking for a shoe aren’t always shown a recommendation for interesting shoes while they are shopping (like on Amazon) and are instead shown different shoes at different points of time on social media in anticipation of the moment they will actually buy a shoe. By allowing new brands to simply list their product and tell their story through advertising, Amazon is trying to be the quickest and the cheapest way to go to market. No hassles! Over the years, it has created an efficient infrastructure, designed for sales conversion, and it is now building tools to allow brands to plug into it at lower unit costs than elsewhere.

To be fair, Amazon isn’t there yet. It’s advertising formats are still limited and product discovery is tactical and therefore, not sufficient for different stages of brand building. However, a look at some recent launches, Spark and Interesting Finds, will tell you that Amazon is trying to close the gaps quickly. This is a replica of the approach Amazon has taken with AWS, building the infrastructure and then layering on top of it platforms/ services for different use cases.

Amazon Spark landing page

What makes me confident that Amazon will be able to build this branding engine is that fact that it has already been able to build a multitude of its own brands without us realizing it. This recent article gives a peek into the brands that Amazon already owns; Amazon Basics is just a tip of the iceberg. If you believe in the best customer theory as highlighted by Ben Thompson aptly in his piece on Amazon’s Whole Foods acquisition, then you can see that in it’s own brands, Amazon has found its best customer. Building a branding engine for “any brand” will now just be the application of this successful strategy.